RBI likely to hike repo rate by 25-35 bps: Economists

Economists expect the Reserve Bank of India (RBI)’ Monetary Policy Committee (MPC) to hike the repo rate by 25-35 basis points (bps) in its policy meeting this week. They also expect the MPC to lower its inflation forecast of 6.7 per cent for 2022-23. The MPC will meet on 3 August 2022 for three days to deliberate on the prevailing economic situation and announce its bi-monthly review on 5 August 2022. Barclays managing director & chief India economist Rahul Bajoria expects the MPC to vote unanimously for a 35 basis points hike in policy rate. He is of the view that under the inflation targeting framework, the RBI actions will likely remain guided by the consequences for growth and inflation. Bank of Baroda in its research report stated that conditions in India do not warrant an aggressive stance by the RBI. The bank expects the central bank to hike rates by only 25 bps in August 2022, followed by another 25 bps rate hikes in the next two meetings. Kotak Mahindra Bank chief economist Upasna Bhardwaj believes that rate hikes could be frontloaded in the current cycle. She expects the repo to rise to 5.75 per cent by end-2022 from 4.9 per cent at present. Factoring in peak inflation in the July-September 2022 quarter, DBS Group Research senior economist Radhika Rao expects a 35 bps hike in August 2022, followed by three 25 bps for the terminal rate to level off at six per cent by end March 2022.

References
1. https://www.financialexpress.com/economy/rbi-likely-to-hike-repo-rate-by-35-50-bps/2612671/
2. https://www.thehindubusinessline.com/economy/mpc-likely-to-go-in-for-smaller-quantum-of-rate-hike/article65706394.ece
3. https://economictimes.indiatimes.com/news/economy/policy/rbi-likely-to-raise-key-policy-rate-by-25-35-bps-to-check-inflation-say-experts/articleshow/93249809.cms